Which is The No 1 FMCG Company In India ?

Our Everyday life is solely dependent on FMCG (Fast Moving Consumer Goods) products from morning to night.This Sector is the India's fourth largest sector & engaged 3.2 million people directly or indirectly.The demand of FMCG products are growing rapidly.Due to low cost & very fast consumption, FMCG products are produced in large volume. This sectors basically covers Processed foods, Drinks,Beverages,Personal care products,Medicines,Cleaning Products,Toiletries,Office Supplies
Today we have done detailed fundamental comparison of  top 6  FMCG Companies in India. This companion is based on Quality & Valuation.

Comparison Of 6 good FMCG Companies by  Fundamental Analysis.

Companies selected for analysis

      1) GODREJCP                        2) MARICO                                    3) HINDUNILVR

      4) DABUR                               5) ITC                                             6) TATA CONSUMER

Process Of Analysis & Understanding of Rank & Score considering Quality & Valuation

A) Comparison considering Quality

Here , 1 means that the company has scored lowest points and 5 means the company has scored highest points.

Here we have analysed considering ten matrices as below :

         1) Current Ratio                                 2) Return on Capital Employed(ROCE)   

         3) Return on Equity (ROE)               4) Retun on Asset (ROA)            

         5) Debt to Equity Ratio(D/E)            6) Inventory Turnover Ratio

        7) Interest Coverage Ratio                8) Operating Profit Margin             

        9) 5 year sales & Profit Growth        10) 5 year sales & Profit Growth    

Comparing  the quality aspects HINDUNILVR is Ranked One &  GODREJ CONSUMER Is Ranked Sixth.

A) Comparison considering Valuation

Here we have valued Stock Price((Highest(6) to Lowest(1)) considering ten matrices as below :

        1) Price/ Earning  to Earnings Growth Ratio(PEG Ratio)    2) Price to sales Ratio (P/S ratio)   

        3) Price to Book Value (P/B Ratio)                                       4) Price/ Earning (PE Ratio)            

        5) Dividend Yield (D/Y ratio)                                                 6) EV/EBITDA Ratio(Lower Better)

        7)EV/Sales Ratio                                                                   8) PEXPB (Lower Better)             

        9) Price to free Cash Flow (Price /FCF)                             10) Price To Graham No(lower Better)    

Comparing  the Valuation  aspects ITC is Ranked One (Cheapest Price) & DABUR is Ranked Sixth (High price).

Please note that this is not any buy and sell recommendation , only a comparative study for education purpose only.

Technical & Fundamental View Of FMCG Major ITC

ITC has diversified product portfolio in Branded Packaged Foods, Personal Care, Education and Stationery, Agarbattis & Safety Matches, Lifestyle Retailing, Cigarettes & Cigars, Hotels, Paperboards & Specialty Papers, Packaging, Agri-business & IT.

ITC seeks to be emerge as an engine of growth in the Indian economy through a vibrant portfolio of future-ready businesses that are well poised to serve the emerging needs of  future market. The synergies between ITC’s diverse businesses lend competitive strength to each other. ITC aspires to be a leader in every business segment that it operates in, whilst creating sustained value for all stakeholders.

ITC has made tremendous effort to decrease its dependence on cigarette business. It has been successfully able to mobilise all its funds generated from the business of Tobacco, in other fast-growing sectors like FMCG, Agri- products, and hospitality chains. 

-:Fundamental Analysis :-

 -:Company Snapshot & Brand Strength :-

   1) Runs 13 Business in 5 Segments.

    2) Over 60 New Products launched in 1919-1920

    3)  ITC exports 90 Countries

    4)  40 lacks farmers are involved

    5) ITC’s FMCG products are available in 60 
        lacs retail outlets.

    6) ITC’s FMCG products are  available in  6
         million retail outlets

    7) Aashirvaad is No. 1 in branded Atta

    8) Bingo! Is No. 1 in Bridges segment of Snack
        Foods (No.2 overall in Snacks & Potato 
        Chips) 

     9)  Sunfeast is No. 1 in Cream Biscuits

10) Classmate is No. 1 in Notebooks

11) YiPPee! is No. 2 in Noodles.

12) Fiama is No.2 in Body Wash

13) Mangaldeep is No. 2 in Agarbattis (No. 1 in Dhoop segment)

-:Financial Health:-

-:Sales & Profit Growth:-

• Last 10 Years Compounded Sales Growth 10%
• Last 10 Years Compounded Profit Growth 14%
• Stock is providing a good dividend yield(4.66%)
• Company has been maintaining a healthy dividend payout

-:Free Cash Flow Trend Analysis:-

Free cash flow is the money  which  has left over after it has paid for everything it needs to continue operating—including buildings, Property, plant, equipment, payroll, taxes, and inventory.It is also Called Owner's earnings.

     Year -    2015           2016           2017             2018                2019                 2020

     FCF -   6543 Cr    7451 Cr       7505 Cr       10291 Cr          9414 Cr          12248 Cr            

Over the last 5 years, ITC has maintained free cash flow growth has been 13.36%, vs industry average of 13.93%. This consistent growth of cash flow is very good for company as well as investors.Such cash flow indicates that company has robust potential to grow in future.

-:Liquidity Analysis:-

Over the last 5 years, ITC has maintained free cash flow growth has been 13.36%, vs industry avg of 13.93%
Company has been maintaining a healthy dividend payout

Company is almost debt free (Debt to equity ratio-0.01)

Current Ratio-2.91 (>1.25 is Good) (A liquidity ratio that measures a company's ability to pay short-term obligations. The higher the current ratio, the more capable the company is of paying its obligations.)

Current Ratio-2 (>1 is Good)( The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. For this reason, the ratio excludes inventories from current assets)

So Company has good Liquidity which help company to  survive in adverse time also.

-:Profitability Analysis -

Company is consistently maintaining High Return Of Equity (ROE>15 Very Good) & High Return Of Capital Employed(ROCE>15% is Good) & Good ROA

-:Valuation -

• The Present Price to Earning Ratio(PE ratio) is 14.47 Which is lower than industry average 49.4
• EPS is steadily growing from Rs. 4.30 in 2011 to Rs. 12.31 in 2020

Conclusion : Analyzing all financial data, In respect of long term view ITC is a Very good investment bet & as per my view every investor must consider to include this dark horse in Portfolio.

Technical View

CMP of ITC is Rs. 217.85. ITC Recovers from March low low Rs.135 slowly following the uptrend Channel drawn red line.Now last 6 session price consolidate between Rs.200-220 & preparing to break out the channel.

The One interesting observation to be noted that  Price mostly respects magic lines of green channel of  89 Moving Average, from very beginning of up journey .

In chart, 3 red arrows indicates efficient resistance by channel, 5 blue arrow shows good support zone.

In middle of June '2016 , green arrow shows that after breakout of green channel ,price steadily up move.

Now again that similar situation is arising if  price able to cross the green channel & price sustain above Rs.225,don't miss the opportunity to buy for multibagger return .

Another notable observation is that from January'20 , significant volume increased which never observed earlier. 

So watch out very closely in coming week.

Support =200-204
Resistance =237/276/315/354(Medium to long Target)